CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Company has sponsored and manages investment entities. Additionally, it has ongoing relationships with several related entities. The following table details these receivables and payables (in thousands):



	December 31,
	2013		2012
Receivables from managed entities and related parties, net:
Real estate investment entities	$	21,487	$	18,060
Commercial finance investment entities ⁽¹⁾	8,174		10,644
Financial fund management investment entities	1,138		1,736
Other	124		178
Receivables from managed entities and related parties	$	30,923	$	30,618

Payables due to managed entities and related parties, net:
Real estate investment entities ⁽²⁾	$	2,940	$	3,300
Other	170		236
Payables to managed entities and related parties	$	3,110	$	3,536


(1)	Net of reserves for credit losses of $36.2 million and $29.6 million, respectively, related to management fees owed from three commercial finance investment entities that, based on estimated cash distributions, are not expected to be collectible.


(2)	Reflects $2.9 million and $3.2 million, respectively, in funds provided by the real estate investment entities, which are held by the Company to self insure the properties held by those entities.

The Company receives fees, dividends and reimbursed expenses from several related/managed entities. In addition, the Company reimburses related entities for certain operating expenses. The following table details those activities (in thousands):



	Years Ended December 31,
	2013			2012			2011
Fees from unconsolidated investment entities:
Real estate ⁽¹⁾	$	23,356		$	17,550		$	13,555
Financial fund management	3,115			3,093			3,647
Commercial finance ⁽²⁾	—			—			—
CVC Credit Partners – reimbursement of net costs and expenses	1,195			2,082			—
RRE Opportunity REIT I:
Reimbursement of costs and expenses	1,633			844			1,515
Dividends paid	114			14			—
LEAF:
Payment for sub-servicing the commercial finance investment partnerships	(898		)	(2,149		)	(405		)
Payment for rent and related expenses	(543		)	(763		)	(120		)
Reimbursement of net costs and expenses	213			287			60
1845 Walnut Associates Ltd:
Payment for rent and related expenses	(702		)	(685		)	(651		)
Property management fees	122			—			—
Brandywine Construction & Management, Inc. – payment for property management of hotel property	(226		)	(211		)	(215		)
Atlas Energy, L.P. – reimbursement of net costs and expenses	240			609			1,049
Ledgewood P.C. – payment for legal services	(240		)	(462		)	(669		)
Graphic Images, LLC – payment for printing services	(179		)	(235		)	(119		)
The Bancorp, Inc. – reimbursement of net costs and expenses	114			118			79
9 Henmar LLC – payment of broker/consulting fees	(41		)	(47		)	(47		)


(1)	Reflects discounts recorded by the Company of $179,000, $678,000 and $475,000 recorded in 2013, 2012 and 2011 in connection with management fees from its real estate investment entities that it expects to receive in future periods.


(2)	During 2013, 2012 and 2011, the Company waived $1.8 million, $3.9 million and $7.2 million, respectively, of its fund management fees from its commercial finance investment entities.

Relationship with CVC Credit Partners. In conjunction with the sale of Apidos to CVC, the Company received, in part, a 33% limited partner interest in CVC Credit Partners, a joint venture between the Company and CVC, and a 33% interest in the General Partner of CVC Credit Partners (see Note 1 for a more detailed description of the transaction). Mr. Jonathan Z. Cohen, the Company's Chief Executive Officer and President, serves as the chairman of the board of CVC Credit Partners for an initial term extending to December 31, 2014 so long as the Company holds at least 10% of the partnership interests. In addition, so long as the Company holds at least 25% of the partnership interests, the Company's consent will be required for all non-routine partnership actions, including dispositions and acquisitions in excess of specified thresholds, declarations of distributions, appointment and termination of senior employees, establishment of new investment funds and financings in excess of specified thresholds.

Under a fee agreement, in connection with the April 2012 sale of Apidos to CVC, the Company is required to remit a portion of the base management fee and incentive compensation it receives from RSO to Apidos-CVC. The percentage paid to Apidos-CVC is determined by dividing the equity RSO holds in four Apidos CLOs by the calculated equity used to determine the base management fee. Any incentive compensation paid to Apidos-CVC excludes non-recurring items unrelated to Apidos-CVC. In October 2013, Apidos CLO VII was refinanced into Apidos CLO XV, resulting in a $15 million reduction in RSO equity in Apidos CLOs, and therefore a reduction in the base and incentive compensation due to Apidos-CVC.

In February 2011, the Company entered into a services agreement with RSO to provide sub-advisory collateral management and administrative services for five CLOs holding approximately $1.7 billion in bank loans whose management contracts RSO had acquired. In connection with the services provided, in February 2011 the management agreement was further amended to permit RSO to pay Apidos-CVC 10% of all base and additional collateral management fees and 50% of all incentive collateral management fees it collects and reimburse its expenses relative to the management of these CLOs. As of December 31, 2013, Apidos-CVC continues to provide subadvisory services to three of these CLOs holding approximately $1.1 billion in bank loans.

Relationship with LEAF. The Company maintains a shared service agreement with LEAF for the reimbursement of various costs and expenses it incurs on behalf of LEAF. In addition, the Company sublet office space in Philadelphia, Pennsylvania from LEAF under a lease that expired in August 2013.

Sub-servicing agreement with LEAF for the commercial finance investment funds. The Company has a sub-servicing agreement with LEAF to provide management services for the four commercial finance investment funds. The fee is equal to LEAF's costs to provide these services up to a maximum of 1% of the net present value of all lease and loan contracts comprising each commercial finance fund's borrowing base under its credit facilities or securitizations. In addition, LEAF is entitled to an evaluation fee equal to 50% of any acquisition or similar fee collected by the Company in connection with the acquisition of any new lease or loan contracts for which LEAF provides evaluation services.

Transactions between LEAF Financial and its investment entities. LEAF and LEAF Financial originated and manage leases and loans on behalf of the commercial finance investment funds for which LEAF Financial is also the general partner. Prior to its deconsolidation in November 2011, LEAF sold leases and loans to the commercial finance funds at fair value plus an origination fee not to exceed 2%. During 2011, LEAF and LEAF Financial sold a total of $821,000 of leases and loans to the commercial finance funds.

Relationship with RRE Opportunity REIT I. The Company formed RRE Opportunity REIT I in 2009. The Company is entitled to receive reimbursements for costs associated with the formation and operating expenses of RRE Opportunity REIT I. As of December 31, 2013, the Company had a $787,000 receivable due from RRE Opportunity REIT I.

On June 17, 2011, the Company loaned $1.4 million to RRE Opportunity REIT I at a rate of interest of 6.5% with a maturity of six months. The loan was repaid on June 28, 2011, along with related interest.

Relationship with Atlas Energy, L.P. (“Atlas”). Mr. E. Cohen, the Company’s Chairman of the Board, also serves as the chief executive officer (“CEO”) and president of the general partner of Atlas. Mr. Jonathan Z. Cohen (“Mr. J. Cohen”), the Company’s CEO and President, is the general partner’s chairman of the board. Atlas reimburses the Company for certain shared services. At December 31, 2013, the Company had a $22,000 payable balance due to Atlas as a result of expenses paid by Atlas on the Company's behalf.

Relationship with 1845 Walnut Associates Ltd. The Company owns a 7% investment in a real estate partnership that owns a building at 1845 Walnut Street, Philadelphia in which the Company also leases office space. In February 2009, the Company amended its lease for its offices in this building to extend the lease termination date through May 2013. In October 2012, the Company signed a new ten-year lease which was amended in May 2013 for 34,476 square feet of office space in the same building commencing in August 2013. The Company was provided a tenant allowance of $1.5 million for renovation of the office and the lease provides for a five-year extension. In March 2013, the Company assumed the property management of the building.

Relationship with Ledgewood P.C. (“Ledgewood”). Until March 2006, Mr. Jeffrey F. Brotman was the managing member of Ledgewood, which provides legal services to the Company. Mr. Brotman remained of counsel to Ledgewood through June 2007, at which time he became an Executive Vice President of the Company. In addition, Mr. Brotman was a trustee of the SERP retirement trusts until he joined the Company. In connection with his separation, Mr. Brotman will receive payments from Ledgewood.

Mr. E. Cohen, who was of counsel to Ledgewood until April 1996, receives certain debt service payments from Ledgewood related to the termination of his affiliation with Ledgewood and its redemption of his interest in the firm.

Relationship with Graphic Images, LLC (“Graphic Images”). The Company utilizes the services of Graphic Images, a printing company, whose principal owner is the father of the Company’s Chief Financial Officer.

Relationship with retirement trusts. The Company has established two trusts to fund the SERP for Mr. E. Cohen. The 1999 Trust, a secular trust, purchased 100,000 shares of the common stock of TBBK ($1.8 million fair value at December 31, 2013). See “Relationship with TBBK,” below. This trust and its assets are not included in the Company’s consolidated balance sheets. However, trust assets are considered in determining the amount of the Company’s liability under the SERP. The 2000 Trust, a “Rabbi Trust,” held 103,494 shares of TBBK common stock at December 31, 2010, all of which were sold during 2011 and 2012. The SERP liability of $5.0 million is included in accrued expenses and other liabilities.

Relationship with 9 Henmar LLC (“9 Henmar”). The Company owns interests in the Trapeza entities that have sponsored CDO issuers and manage pools of trust preferred securities acquired by the CDO issuers. The Trapeza entities and CDO issuers were originated and developed in large part by Mr. Daniel G. Cohen (“Mr. D. Cohen”). The Company agreed to pay Mr. D. Cohen’s company, 9 Henmar, 10% of the fees the Company receives, before expenses, in connection with the first four Trapeza CDOs that the Company sponsored and manages.

Relationship with TBBK. Mr. D. Cohen is the chairman of the board and Mrs. Betsy Z. Cohen, (“Mrs. B. Cohen”, who is the wife of Mr. E. Cohen (Mr. E. Cohen and Mrs. B. Cohen are the parents of Messrs. J. Cohen and D. Cohen) is the CEO of TBBK and its subsidiary bank. Beginning in June 2011, the Company sublet a portion of its New York office space to TBBK. In 2012 and 2011, the Company sold 6,992 and 96,502 of its shares of TBBK common stock for $55,000 and $837,000, respectively, and realized gains of $5,000 and $179,000, respectively. The Company did not sell any of its TBBK stock during 2013. In addition, TBBK provides banking and operational services to LEAF Financial. During 2011, LEAF Financial paid $3,000 in fees to TBBK (none in 2013 or 2012). Additionally, the Company held cash deposits of $32,000 at TBBK at December 31, 2013.

Relationship with certain directors, officers, employees and other related parties. The Company serves as the general partner of seven partnerships that invest in regional domestic banks. The general partner may receive a carried interest of up to 20% upon meeting specific investor return rates. Some of the partnerships’ investors wanted to ensure that certain individuals who are critical to the success of the partnerships participate in the carried interest. For four of these partnerships, the total participation authorized by the Company’s compensation committee was 48.5% of the 20% carried interest, of which Mr. J. Cohen is entitled to receive 10%. Nine individuals, four of whom are employees of the Company, are entitled to receive the remaining 38.5%. For the remaining three partnerships, the total participation authorized by the Company's compensation committee was 50% of the 20% carried interest. Six individuals, five of whom are employees of the Company, are entitled to receive the remaining 50%. No carried interest had been earned by any of the individuals through December 31, 2013.

Relationship with Brandywine Construction & Management, Inc. (“BCMI”). BCMI manages the property underlying one of the Company’s real estate investments. Mr. E. Cohen is the chairman of BCMI.

In March 2008, the Company sold a 19.99% interest in two indirect subsidiaries that hold a hotel property in Savannah, Georgia to a limited liability company owned by Mr. Adam Kauffman ("Mr. A. Kauffman") for $1 million plus $130,000 in fees, and recognized a gain of $612,000. The terms of the sale agreement provided an option to Mr. A. Kauffman, who is president of BCMI, to purchase up to the balance of the Company’s interest in the hotel for $50,000 per 1% interest purchased. The purchase option expired in July 2011. Mr. A. Kauffman now has a right-of-first-offer to purchase the balance of the Company’s interest in the hotel.

In November 2012, the Company paid a $95,000 fee to BCMI in connection with the negotiation and ultimate sale of a property in which the Company had a loan investment.

Advances to Affiliated Real Estate Limited Partnership. During 2011, the Company agreed to increase its advances to an affiliated real estate limited partnership under a revolving note to $3.0 million (from $2.0 million), bearing interest at the prime rate. Amounts drawn, which are due upon demand, were $2.3 million and $2.2 million as of December 31, 2013 and 2012, respectively, which are included in Receivables from Managed Entities and Related Parties, net of allowance for credit losses. The Company recorded $73,000, $57,000 and $76,000 of interest income on this loan during 2013, 2012 and 2011, respectively.